Digital Ally: This Movie Has A Bad Ending

Digital Ally (DGLY) stock has soared over 386 percent amid calls for cops to wear body cameras following the Ferguson, Mo. police officer shooting of an unarmed teenager. DGLY took advantage of an unbelievable run in the stock for a small raise, a heady but ridiculous action in light of how short DGLY falls below the industry leaders.

The old dash cameras – DGLY’s key product – are not even part of the national conversation.

"The recent emergence of body-worn cameras has already had an impact on policing, and this impact will only increase as more agencies adopt this technology,'' said Chuck Wexler, executive director of the Police Executive Research Forum, author of a recent report on the use of police body cameras.

DGLY’s in-car video revenue will likely continue to erode due to superior, cheaper body cameras offered by well-known vendors such as stun-gun maker Taser International (TASR), a profitable company up 43 percent since Ferguson to $17 plus change.

*DGLY intends to introduce a bullet camera that is not new, as evidenced by a simple search for “helmet camera” or “glasses camera.” Its weak brand, combined with a tiny sales force will get the DGYLY product shot down by police tech suppliers such as TASR.

DGLY pales in key cloud video management solutions compared to TASR. The complexity involved is described by New York Police Commissioner William Bratton in the Wall Street Journal:

"This is an extraordinarily complex initiative. It is not simply going down to your local RadioShack, buying one of these things, and putting it on," Mr. Bratton said. "The storage issue is phenomenal."

DGLY stock at about $19.50 is not sustainable. As excitement wanes, TheStreetSweeper believes the horrible fundamentals will set in and investors will have to pull out the handkerchief as this movie winds to a close.

Here’s are some financial highlights:

*Continuing drop in earnings per share over two years. A 99 cent loss prior year turned into a current $1.14 loss.

*Net income collapsed by 1376 percent versus last year, or from minus $.07 million versus current minus $.99 million.

*Return on equity significantly down at -64 percent, well below industry.

* Important Disclosure: The owners of TheStreetSweeper hold a short position in DGLY and stand to profit on any future declines in the stock price.

Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to scolberg@thestreetsweeper.org.